Japan’s current account surplus widens on strong investment gains

TOKYO: Japan’s current account surplus widened in March, Finance Ministry data showed on Thursday, easing some concerns about the country’s balance of payments as strong gains in investment income more than offset soaring fuel costs.

Japan’s current account surplus stood at 2.55 trillion yen ($19.68 billion) in March, the data showed, up 69 trillion yen and the second month in a row the balance was down. in the dark, according to the data. It compares with economists’ median forecast of a 1.75 trillion yen surplus in a Reuters poll.

Rising oil import costs offset gains in investment income, with continued uncertainty due to the Ukraine crisis and the COVID-19 pandemic, data showed Thursday.

Current account data underscored the reliance of Japan’s resource-poor economy on commodity imports, which were boosted by the weaker yen, pushing the trade balance into deficit.

The data also highlights the shift in Japan’s economic structure as the country derives significant returns from its past investment in securities and outward direct investment, which has replaced trade as the main driver of the surplus. of its current account in recent years.

Many analysts see Japan’s current account surplus persisting for the foreseeable future as long as it is supported by overseas investment returns.

“It wouldn’t surprise me if the current account swings into the red in about 20 years,” said Takeshi Minami, chief economist at the Norinchukin Research Institute.

“Given the possibility that Japan’s aging population may eventually benefit from past portfolio investment returns, we cannot rely on income gains to sustain the current account surplus indefinitely.”

For the full year 2021, Japan recorded a current account surplus of 12.6 trillion yen, down 3.6 trillion yen from the previous year, while the trade balance s turned into a deficit due to rising fuel costs.

The current account surplus has been declining for four years in a row.

Although a weak yen also contributed to inflating the cost of imports, the increase in export volumes was not as significant as before due to a continued shift of production by exporters overseas. .

($1 = 129.5900 yen)

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